Ch 4 acct extra credit

Which of the following may require an accrual adjusting entry that is recorded with a debit to an expense and a credit to a liability?

Interest owed on notes payable Utilities to be paid in later accounting period

Select the following statements that are correct regarding Dividends?

Dividends have a normal debit balance. Dividends are closed into retained earnings by debiting Retained Earnings. Dividends are closed into retained earnings by crediting Dividends.

A contra-account ______.

example is Accumulated Depreciation because it has a normal credit balance has a normal balance opposite of the account it offsets negative account

Identify the entries needed for the closing process. (Select all that apply.)

Debit each revenue, credit each expense, and record the difference in Retained Earnings. Credit Dividends and debit Retained Earnings.

______Expense should be recorded to recognize the use of and benefit received from long-lived assets, such as equipment, during the accounting period. (Enter one word per blank.)

Depreciation

The adjusting entry to record interest owed on obligations at the end of the accounting period includes a debit to ______.

Interest Expense and credit to Interest Payable

Which of the following transactions constitutes an accrual adjustment involving a revenue account?

Interest Revenue on a note receivable

The adjusting entry to record revenue for services the seller has performed but not yet collected requires ______.

a debit to Accounts Receivable and credit to Service Revenue

Why is the Deferred Revenue account reduced during the adjustment process?

As the seller performs its obligations, it is removed from Deferred Revenue and transferred into a revenue account.

____recognition principle requires an adjustment for salaries and wages expense incurred during the accounting period that will be paid in a future accounting period.

Expense

When will Accounts Receivable be involved in an adjusting entry?

Revenue is earned but not yet collected or recorded at the end of the period.

A closing entry may include a ______.

credit to Wages Expense

The adjusting entry a company would record for the amount of wages incurred but not yet paid will cause which of the following? (Select all that apply.)

increase liabilities decrease stockholders' equity

Which of the following adjusting entries are recorded with a debit to an expense and a credit to a liability?

Accruing for services received that have not yet been paid

The adjusting entry to record salaries and wages owed to employees at the end of the accounting period includes a debit to "Salaries and Wages _____and a credit to "Salaries and Wages____

Expense, payable

Which of the following are temporary accounts that will be closed at the end of the accounting period during the closing process?

Expenses Dividends Revenues

Which of the following statements is correct regarding the adjustment to record interest accrued on a note payable?

Interest on the note payable is classified as an expense since it is a cost of borrowing. Reason: Interest expense is generally recorded in Interest Payable until it is paid. The amount is not directly added to Notes Payable. Interest on the note payable is classified as a reve

Which of the following may require an accrual adjusting entry that is recorded with a debit to an expense and a credit to a liability? (Select all that apply.)

Interest owed on notes payable Utilities to be paid in later accounting period

Why is it necessary to make adjustments to revenue accounts at the end of the accounting period?

Revenues the seller has performed of its obligations but not yet billed to Accounts Receivable, should be recorded as a revenue. Deferred Revenue should be reduced for any portion the seller has fulfilled of its obligations during the current period.

Which of the following statements is correct regarding the adjustment for salaries and wages accrued but not paid at the end of the accounting period?

Salaries and Wages Expense will increase by the amount of the unpaid salaries and wages.

How does the adjustment for depreciation differ from other deferral adjustments?

The depreciation adjustment uses a contra-account rather than reducing the asset accounts directly.

Which of the following statements is correct regarding a long-lived asset such as equipment?

The original cost in the Equipment account will not change during the adjustment process.

What are the effects on the accounting equation from the adjustment for income tax expense accrued, but not paid, at the end of the accounting period?

Total liabilities will increase and total stockholders' equity will decrease.Reason: The amount of income tax accrued, but not paid, during the current period should be recorded as an increase to the liability, Income Tax Payable, and an increase to Income Tax Expense. An increase in an expense account results in a decrease to stockholders' equity.

Why are the adjustments important to the preparation of the financial statements?

Unadjusted financial statements could present a misleading and incomplete picture of the company's financial results. Adjustments ensure the revenues the seller has performed of its obligation and expenses incurred are reflected in the income statement. Adjustments ensure that the balance sheet reports all of the economic resources the company owns and all of the obligations the company owes.

Closing journal entries are recorded ______.

after the financial statements have been prepared

Which of the following is true about the adjusting entry to record the revenue for which the seller has performed of its obligations but not yet collected? (Select all that apply.)

assets will increase stockholders' equity will increase

Deferred Revenue is credited when ______.

cash is collected in advance of the revenue

The step in the accounting cycle where entries are recorded to update retained earnings and zero out temporary accounts is referred to as the ___ process

closing

The entry to record the payment of wages incurred in the prior accounting period is recorded with ______.

credit Cash debit Salaries and Wages Payable Reason: Earlier, the company recorded an adjusting entry to accrue wages owed for work performed with a debit to Salaries and Wages Expense (+E,-SE) and a credit to Salaries and Wages Payable (+L). Now the company is paying the amounts owed and recording a debit to Salaries and Wages Payable (-L) and credit to Cash (-A).

As of December 31 (the end of the accounting period), ABC Company has a profit before tax of $12,000. The company's tax rate is 25%. The adjustment will include a(n)_____ of ____ to income tax payable

credit, 3000

For companies that generate net income during the current period, the closing entries will result in a net ______ entry to Retained Earnings.

credit;Reason: Retained Earnings is a stockholders' equity account. Equity accounts increase with a credit entry. Since net income increases retained earnings, there would have to be a credit entered in retained earnings.

The closing entry to close Rent Expense requires Rent Expense to be ___ and retained earnings to be ___

credited, debited

The entry to record the payment of wages incurred in the prior accounting period is recorded with ______. (Select all that apply.)

debit Salaries and Wages Payable credit Cash

The adjusting entry to record depreciation on equipment includes a ______.

debit to Depreciation Expense credit to Accumulated Depreciation

Salaries and Wages Payable is ______.

debited when the wages that were previously recorded are paid Reason: An adjusting entry to accrue wages owed for work performed is recorded with a debit to Salaries and Wages Expense (+E,-SE) and a credit to Salaries and Wages Payable (+L). Later, when the amounts owed are paid, the payment is recorded with a debit to Salaries and Wages Payable (-L) and credit to Cash (-A).

A contra-account ______.

example is Accumulated Depreciation because it has a normal credit balance has a normal balance opposite of the account it offsets

The effect of accrual adjustments involve debiting a(n) ______.

expense and crediting a payable

As of December 31, the end of the accounting period, $700 of salaries and wages owed to employees have been incurred but not paid. The employees will be paid on January 5. On December 31, Salaries and Wages ____ will be debited and Salaries and Wages _____will be credited by $700.

expense, payable

The adjusting entry to record interest owed on obligations at the end of the accounting period includes a debit to "Interest _____" and a credit to "Interest _____"

expense, payable

True or false: Since Retained Earnings is involved in the closing process, it is considered a temporary account.

false Reason: Although Retained Earnings is involved in the closing process, it is a permanent, not a temporary, account.

After the adjustments have been completed, the adjusted balance in the Interest Payable account represents ______.

interest that has accrued, but has not been paid, at the end of the period

If a company records a debit to Salaries and Wage Payable and a credit to Cash, what has occurred? The company is ______.

paying for salaries and wages that had been accrued earlier

If a company records a debit to Salaries and Wage Payable and a credit to Cash, what has occurred? The company is ______.

paying for salaries and wages that had been accrued earlier Reason: Earlier, the company recorded an adjusting entry to accrue wages owed for work performed with a debit to Salaries and Wages Expense (+E,-SE) and a credit to Salaries and Wages Payable (+L). Now the company is paying the amounts owed and recording a debit to Salaries and Wages Payable (-L) and credit to Cash (-A).

Closing entries move the balances from the ______ accounts into the Retained Earnings account.

temporary

The Deferred Revenue T-account will show which of the following?

the amounts the seller has fulfilled of its obligations that were collected in advance on the debit side the normal ending balance on the credit side the amounts received in advance that the seller has not yet fulfilled of its obligations on the credit side

After the adjustments have been recorded, Deferred Revenue on the balance sheet reports the amount of ______.

the sales or services still owed to the customer

Deferred Revenue should be reduced and Revenue increased for the amount of revenue ______ during the period.

the seller performs of its obligations to its customers

After the adjustments have been completed, the adjusted balance in the Interest Expense account represents ______.

total interest that has been paid and/or accrued during the period

True or false: The balance in the "Interest Expense" account and the balance in the "Interest Payable" account may be different after the adjustments are posted.

true Reason: Interest Expense will contain an amount equal to all interest accrued during the accounting period. Interest Payable will only contain the amount of interest expense that has not been paid as of the end of the accounting period.

True or false: The adjusting entry to record interest owed for the period will cause the balance in the Note Payable account to increase.

true Reason: Accrued interest increases the Interest Payable account. The amount does not affect the Note Payable account. Only principal payments on the note will affect the balance in the Note Payable account

True or false: Interest expense that has accrued on a note payable will be recorded in the Interest Payable account. When the interest is paid in a future period, the Interest Payable account will be reduced.

true: Reason: The entry will include a debit to Interest Expense and, if the interest is not paid, a credit to Interest Payable. When the amount is paid in the future, the Interest Payable account will be reduced.

Adjusting entries are important because ______.

without them, the financial statements would be misleading. adjustments ensure that the balance sheet reports all of the economic resources the company owns and all of the obligations the company owes